“If the Overseas Investment Act is mentioned in very broad terms and it allows for additions (to existing restrictions), that’s something that we want to check out,” acting Labour leader Annette King told BusinessDesk. “Potentially it is something that could be carved out for us.”
One of Labour’s non-negotiable bottom lines for TPP support is that a future government must be able to “further restrict” sales of sensitive land and other assets that may be deemed ‘sensitive’.
Reports immediately following the conclusion of TPP talks overnight Tuesday, in Atlanta, Georgia, suggested New Zealand would only be allowed to apply its existing Overseas Investment Act regime for sensitive land, which requires foreign purchasers to pass a ‘benefit to New Zealand’ test. That test became tougher last month when government ministers rejected an application by Shanghi Pengxin, already a major investor in New Zealand agri-business, to buy the central North Island property known as Lochinver.
However, the MFAT briefing note on TPP’s investment chapter and ‘investor state dispute settlement’ (ISDS) provisions says that New Zealand is one of four among the 12 TPP nations that “operate investment screening regimes for significant or sensitive acquisitions” and would continue to do so, although it would offer preferential terms to TPP member countries.
Instead of operating a $100 million threshold for assets covered by the screening regime, the threshold for investors from TPP countries would become $200 million.
“New Zealand also retains the the flexibility to make the approval criteria under the Overseas Investment Act more or less restrictive,” the MFAT briefing paper says.
King said Labour was likely to comment further after a briefing on Monday from Trade Minister Tim Groser, who will have returned from the US by then.
Labour’s five bottom lines related to being able to further restrict foreign land sales; preserving Pharmac; allowing the government to honour the Treaty of Waitangi; the government being able to regulate for public policy reasons without fear of being sued by foreign corporations for loss of income under the ISDS regime; and “meaningful gains for farmers”.
Pharmac is essentially unchanged by TPP, gains for farmers other than dairy sector are roughly in line with industry expectations, and there is a “carve-out” clause to recognise commitments to the Treaty of Waitangi.
On the ISDS regime, the MFAT note outlines numerous areas, including private prison services and the tobacco industry, where the ISDS provisions cannot be invoked.
However, it commits only that it is “very unlikely” that “government action to legitimate public welfare measures, such as public health, safety and the environment” would be capable of being defined as expropriation and therefore capable of an ISDS challenge.
“Agreements relating to matters such as land, water or the delivery of correctional, healthcare or other social services” are outside the ISDS regime’s scope, as are “decisions under the Overseas Investment Act to grant or decline foreign investment,” the paper says. The ISDS provisions won’t apply at all between New Zealand and Australia.
“Government action (or where the government does not take an action) that is inconsistent with the investor’s expectations will not in and of itself constitute a breach of the investment chapter leading to a potential ISDS, even if there is loss or damage to the covered investment,” the briefing paper says. Nor would government decisions to reduce or end subsidies or grants be grounds for an expropriation claim.
“Neither Pharmac nor the Treaty of Waitangi are subject to the dispute settlement mechanism under TPP,” the paper says.
On the basis of the briefing paper, Stephen Jacobi, the head of the New Zealand International Business Forum, a free trade lobby group, said: “I would have thought it is possible to amend the Overseas Investment Act to to take account of future restrictions on land.
“I don’t think it’s a good idea,” he said and stressed, as did King, that a final verdict would depend on the detail in the TPP text.
Meanwhile, Canadian media reported the country’s Trade Minister Ed Fast saying he expected to release a provisional version of the text “within days”. Canada goes to the polls in federal elections on Oct. 19.